THE City watchdog is proposing to make it easier for state-owned companies to list their shares, smoothing the way for a potential record-breaking London float of Saudi oil giant Aramco.

The Financial Conduct Authority’s plans to reform stock market rules by creating a new category for sovereign-owned companies signal a determination to keep Britain open for business as a financial hub after Brexit.

But it drew criticism from investors concerned about corporate governance standards and protection of minority shareholders.

The Saudi government plans to sell a stake of about 5 per cent in Aramco, whose value is estimated at about £1.5trillion.

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London is vying with New York to host the world’s biggest flotation, late next year.

Current rules prevent a “premium listing” unless at least 25 per cent of shares are sold.

The UK tightened listing rules after its reputation was damaged by scandal-tainted overseas businesses controlled by foreign tycoons such as Eurasian Natural Resources and Bumi.

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The state-owned Saudi Aramco would be a potentially record-breaking addition to the index

Sovereign owners are different from private sector individuals or companies

FCA chief executive Andrew Bailey

FCA chief executive Andrew Bailey said: “Regulatory protections for investors lie at the core of the listing regime. However, it is important that these protections remain well targeted. Refining the listing regime in this way would make UK markets more accessible while ensuring that the protections afforded by our premium listing regime are focused and proportionate.

“Sovereign owners are different from private sector individuals or companies – both in their motivations and nature. Investors have long recognised this and capital markets are well adapted to assess the treatment of other investors by sovereign countries.”

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Aramco has an estimated value of about £1.5trillion

Ashley Hamilton Claxton at Royal London Asset Management, which manages over £20billion UK-listed equities, argued that implementing the proposals would be “bad news for London and will reverse the progress we have made in recent years to uphold strong governance and protect minority shareholders”.

She added: “It looks like the FCA is consulting on amending the existing listing rules to accommodate the peculiarities of one company, which is not a very effective strategy for regulating the market as a whole.

“The listing rules should apply for any premium listing, regardless of whether the controlling investor is a private individual, consortium or a sovereign state.”